NZ dollar little changed as Fed tapering weighs; RBA minutes loom

Tuesday 19th November 2013

The New Zealand dollar was little changed in Northern Hemisphere trading after Federal Reserve official William Dudley said US growth is still a forecast rather than reality, weighing on investors' expectations for when the Fed will start unwinding its stimulus programme.

The kiwi traded at 83.57 US cents at 8am in Wellington from 83.50 cents at 5pm yesterday. The trade-weighted index was 77.97 from 77.91 yesterday.

New York Fed president Dudley said in a speech that he's optimistic about US growth over the next two years, which the US central bank will continue to monitor in deciding when and how quickly to pull back its US$85 billion monthly bond buying programme. Still, "the notion that the economy will grow more swiftly remains a forecast rather than a reality at this point," he said.

Dudley's speech and weak home building figures added to uncertainty over the Fed's planned tapering, and the yield on US 10-year Treasuries fell 3.2 basis points to 2.675 percent.

"The carry-over sentiment from last week and the building numbers play to no tapering this year. That saw US interest rates lower and the US dollar lower," said Imre Speizer, market strategist at Westpac Banking Corp. "Tapering might drag on for ages, but by December the local stuff should be more obvious whether we're going to see rate hikes and I expect the kiwi higher."

Speizer said the local currency may trade between 83.30 US cents and 84 cents today.

The kiwi rose to 89 Australian cents at 8am in Wellington from 88.82 cents ahead of the release of minutes to the last RBA policy meeting, when it kept the key rate unchanged at 2.5 percent and said Australia's currency is over-valued.

Westpac's Speizer said the kiwi may gain against its trans-Tasman counterpart if the minutes keep another rate cut on the table, and talk more to Australia's currency being too high.

The local currency was little changed at 83.66 yen at 8am in Wellington from 83.60 yen yesterday, and was almost unchanged at 61.85 euro cents from 61.86 cents. It edged up to 51.86 British pence from 51.76 pence yesterday.

BusinessDesk.co.nz

Comments from our readers

No comments yet